* This article was originally presented at the eleventh joint ICC-AAA -ICSID Colloquium held in San Francisco on October 17,1994.

The search for quicker and cheaper means of resolving business disputes has, in recent years , given rise to increased interest in alternatives to both traditional litigation and arbitration, particularly in the United States and other common law jurisdictions sometimes criticised for their "litigious excesses ."¹ In Europe, the promotion of alternative dispute resolution techniques other than arbitration ("ADR") ² has, until now, been much less pronounced, although ADR, in various forms, has long existed there and in other parts of the world.³ Of course, in Asia, ADR is well known to be firmly rooted in the local landscape.

There are powerful forces that militate in favour of ADR. The conduct of formal litigation, or even arbitration, may, in addition to being costly and possibly time-consuming, entail considerable disruption and distraction for the parties involved. Ultimate victory may therefore often be obtained at what, in retrospect, appears to the winning party to be a disproportionately high cost. Indeed, practitioners realise that most commercial disputes can best be resolved through negotiation, and, in fact, the great majority (approximately two-thirds) of the arbitrations administered by the ICC are settled by the parties prior to completion. In many countries, moreover, judges and arbitrators regard it as their duty to try to help the parties settle their dispute before proceeding with a case.

Ever since the creation of an arbitration system by the ICC, there has, thus, existed by its side a procedure for conciliation.⁴ In fact, the very first dispute successfully resolved by the ICC following the establishment of its Court of Arbitration (now the International Court of Arbitration) in 1923 was settled by conciliation,⁵ and more of the disputes submitted to the ICC, during its early years, were resolved by conciliation than arbitration.⁶

In more recent times, however, the ICC's conciliation rules have fallen into relative disuse. Recognising this, the ICC undertook in the mid- 1980's to revise and simplify those rules in the hope that this would increase their appeal to international users. The new ICC Rules of Optional Conciliation (the "Conciliation Rules") entered into force on January 1, 1988.⁷ Since that time, however, there has not been a rush to use them. Fewer than 60 requests for conciliation (as opposed to more than 2,000 requests for arbitration) have since been received by the ICC.

The relative neglect of the Conciliation Rules, in contrast to the steady growth of ICC arbitration over the years, has led many - particularly in Europe where the ICC is headquartered - to question the usefulness and appeal of conciliation in an international context. Confidence and trust, which are critical to any non-binding dispute resolution process, are often felt to be more elusive in an international, as opposed to a purely domestic, setting. While this may often be true, this is nevertheless a feature of international commerce that is likely to diminish in the years to come as the volume of international trade continues to expand. Moreover, it is precisely because misunderstandings brought about by cultural and other differences may lie at the heart of so many disputes between parties to international transactions that one might reasonably assume that in the international domain ADR might have its greatest potential, at least where the parties concerned are in good faith.

Given the current interest in ADR and the controversy about its ultimate usefulness in an international context, this paper examines the operation of the ICC's Conciliation Rules and certain of the issues that may bear upon the parties' decision to submit to such a process and how it should be conducted. So much of the information currently available about ADR is of an anecdotal nature and there is so little experience of conciliation's use internationally that, at the very least, this paper will hopefully serve to increase understanding of the ICC conciliation process and to bring into focus some of the issues that may arise in practice.

I - THE ICC RULES OF OPTIONAL CONCILIATION

The first and possibly most significant feature of the Conciliation Rules is that they nowhere state what conciliation is or what precisely an ICC conciliator is required to do. Although the Rules (Article 11) envisage that the conciliator may put forward proposals, which the parties are free either to accept or reject (Article 7), for the settlement of the dispute in question, they do not require the conciliator to do so. How conciliators conduct the conciliation and whether or not they make any recommendations to the parties are matters left entirely to the conciliators' discretion (Article 5),⁸ the result being that "conciliation" under the Conciliation Rules can reasonably embrace any process in which a third-party neutral assists parties to settle a dispute amicably.

For all practical purposes, therefore, no particular significance need be attached to the use in the rules of the word "conciliation," as opposed, for example, to "mediation." Although "conciliation" and "mediation" are often distinguished, the Conciliation Rules are so broadly drafted that they should permit an ICC conciliator to "conciliate" or to "mediate," no matter how those respective terms may be understood.⁹

Given the very broad discretion allowed the conciliator in fashioning conciliation procedures, ICC conciliation can, thus, perhaps best be described by stating what it is not, i.e. it is not - like arbitration - a process leading to a binding adjudication or an award, but rather, hopefully, to a settlement agreement, by which the parties would be bound (Conciliation Rules, Article 7).

A key feature of the ICC conciliation process, therefore, is that it is entirely voluntary from beginning to end. All of the parties concerned must agree to participate in the attempted conciliation upon the submission of a conciliation request (Conciliation Rules, Article 3), and any party may terminate the process at any time without giving any reason (Conciliation Rules, Article 7). This would, in principle, be the case even if the parties had agreed to the conciliation of disputes in their contract prior to a dispute arising,¹⁰ which is why the ICC has not elaborated a recommended conciliation clause separate from the recommended standard ICC arbitration clause.¹¹

It has nevertheless been suggested by some commentators that parties envisaging conciliation should insert a specific clause in their contract to this effect.¹² Although such a clause may be of some benefit, in certain circumstances, there will be obvious limits to its ultimate utility given the express requirement in the Conciliation Rules that all parties must agree to participate in a conciliation after the receipt of a conciliation request and the right of any party to bring a conciliation to an end at any time.¹³

Given the non-binding and voluntary nature of the conciliation process, the drafters of the Conciliation Rules were eager to ensure that such Rules should be both simple and flexible, that they should protect the confidentiality of all views expressed or proposals made with respect to the possible settlement of the dispute in question and that they should allow the process to be conducted rapidly and at the lowest possible cost.¹⁴ These criteria can now conveniently be used to review the Conciliation Rules' main features.

A. Simplicity

The Rules are, first of all, extremely concise, with only eleven articles.

An ICC conciliation proceeding is commenced by the submission to the Secretariat of the ICC International Court of Arbitration of a conciliation application (together with a payment of U.S.$ 500) (Conciliation Rules, Article 2). The application is required to set out "succinctly" the purpose of the request. However, no particular documents or other information are required to be included, as in the case of an ICC Request for Arbitration.

There is also no requirement, as already stated, that there be a previous agreement between the parties to conciliate their disputes. Rather, the conciliation is set in motion if the other party agrees to participate within 15 days after having been notified of the conciliation request (Conciliation Rules, Article 3).

If the parties agree to attempt conciliation, the Secretary General of the ICC Court then appoints a conciliator. Unlike in ICC arbitration, only the Secretariat of the ICC Court and not the ICC Court itself has any involvement in the process. Thus, the Secretary General (rather than the ICC Court) designates the conciliator and fixes the conciliator 's remuneration as well as the ICC's administrative charge.¹⁵ The Rules (Article 4) also provide for a sole conciliator (although they do not exclude the possible appointment of more than one conciliator should this be the parties' wish).¹⁶

The Rules do not lay down any conditions or requirements concerning the conciliator to be appointed. Once appointed, the conciliator is to conduct the proceedings as he or she thinks fit (Article 5).

B. Flexibility

Apart from the requirement that the conciliator must be "guided by the principles of impartiality, equity and justice " (Conciliation Rules, Article 7), the Conciliation Rules, as already noted, do not place any particular constraints in respect of procedure on either the conciliator or the parties conducting the conciliation proceedings.

The Rules, thus, do not require the conciliator to meet or communicate with the parties together, as would normally be the case in an arbitration proceeding. The conciliator is therefore free, if appropriate in the circumstances, to conduct individual meetings with the parties and to shuttle between them. The conciliator is also not required (as, for example, under the UNCITRAL Rules) to disclose to a party information obtained from another party during the conciliation process. Apart from the initial application to conciliate (and the other party 's acceptance), there is no requirement (also unlike under the UNCITRAL Rules) that any submissions be made in writing. There is no requirement that the conciliator make settlement proposals to the parties.

As already stated, the proceedings may be commenced or terminated at any time by either party. In this connection, the Rules also do not (unlike, e.g., the UNCITRAL Rules) contain any restriction on a party 's right to initiate a conciliation concurrently with arbitral or judicial proceeding s.¹⁷

C. Confidentiality

The drafters of the Conciliation Rules assumed that, before agreeing to participate in a conciliation proceeding, parties will normally wish to be sure that they do not risk prejudicing themselves in the event that the conciliation is not successful and subsequent arbitration or judicial proceedings are instituted. The Conciliation Rules therefore provide (see Article 6) that:

"The confidential nature of the conciliation process shall be respected by every person who is involved in it in whatever capacity."

The confidentiality of any agreement reached by the parties during the conciliation is, moreover, expressly protected (Conciliation Rules, Article 7),¹⁸ and Article 11 further provides that

"The parties agree not to introduce in any judicial or arbitration proceeding as evidence or in any manner whatsoever :

a) "any views expressed or suggestions made by any party with regard to the possible settlement of the dispute;

b) "any proposals put forward by the conciliator;

c) "the fact that a party had indicated that it was ready to accept some proposal for a settlement put forward by the conciliator."

The Conciliation Rules (Article 10) also prohibit the conciliator from acting "in any judicial or arbitration proceeding relating to the dispute which has been the subject of the conciliation process whether as an arbitrator, representative or counsel of a party" or as a witness, unless the parties otherwise agree.

The Conciliation Rules therefore clearly envisage the complete separation of the conciliation and arbitration processes, unless the parties have otherwise agreed , in contrast to ADR schemes where the conciliator (or mediator) would carry on as an arbitrator if the conciliation (or mediation) attempt were to fail.¹⁹ The ICC Rules of Arbitration , moreover, do not make any provision for possible conciliation during the ICC arbitral process , unlike under certain other regimes where conciliation may be integrated into the arbitral process.²⁰

It is to be noted that the provisions on confidentiality relate, by their terms, only to the conciliation process itself and, thus, may not necessarily bar any reference, in a subsequent arbitration or judicial proceeding, to the fact that conciliation may have been requested by a party, but refused by the other. Nor does Article 11 expressly bar the introduction in subsequent judicial or arbitration proceedings of evidence provided to a party by the other during a conciliation. (Evidentiary submissions may arguably be protected, however, by the general confidentiality rule set forth in Article 6.)

In any event, the express confidentiality protections set forth in the Conciliation Rules are much more extensive than those provided for in the ICC Rules of Arbitration, and the conciliation process can therefore reasonably be expected to be more discreet.²¹

D. Time and cost

The Conciliation Rules do not lay down time limits for the conciliation once the parties have agreed to attempt to conciliate.²² However, they do require the conciliator to "set a time limit for the parties to present their respective arguments to him" (Conciliation Rules, Article 4). The conciliator is, thus, in a position to conduct the conciliation as swiftly as may be feasible in the circumstances of the case. Unlike in ICC arbitration, the process cannot be said to suffer any delay on account of the need for intervention by the ICC Court as the Court is not involved in the administration of the Conciliation Rules, as already noted.

The costs of ICC conciliation are also intended to be substantially lower than in ICC arbitration. The Schedule of Conciliation and Arbitration Costs appended to the ICC Rules (Appendix III) provides that the ICC administrative expenses for a conciliation procedure shall be fixed at one­ quarter of the amount applicable in an arbitration. The fee of the conciliator is fixed by the Secretary General of the ICC Court in a "reasonable amount, taking into consideration the time spent, the complexity of the dispute and any other relevant circumstances (Article 1(b) of Appendix III to the ICC Rules)." The Secretary General is therefore not bound, as is the ICC Court (other than in exceptional circumstances), to apply a fee scale established with reference to the amount in dispute, although he may reasonably be expected to take account of that scale in arriving at a decision regarding the conciliator 's fees.

Article 9 of the Conciliation Rules provides that, upon the conciliation file being opened, the Secretariat of the Court shall fix an advance on costs, to be paid by the parties in equal shares, which is intended to cover the estimated fees of the conciliator, the expenses of the conciliation and the ICC's administrative charge. (The final cost of the conciliation is determined, however, only upon the conciliation's termination.) Unless the parties otherwise agree, therefore, acceptance by the parties of an attempt to conciliate necessarily entails their agreement to share equally in the costs of the proceeding.

II - THE CONCILIATION RULES IN PRACTICE

During the six-year period between January 1, 1988, when the current version of the Conciliation Rules entered into force, and December 31, 1993, the ICC received 54 Requests for Conciliation, and, out of that relatively small number of applications, an agreement to attempt conciliation was reached in 16 cases. Of those 16 cases, however, only ten actually went forward (of which one is still pending). Five of the other six cases were withdrawn - in four of them by the party who initiated the procedure - before the appointment of a conciliator. The sixth case was settled by the parties directly without recourse to the conciliator appointed.

Of the nine cases that actually proceeded and that have been completed, five ended successfully with settlement agreements, one was converted into an arbitration (which is still pending) after the settlement of some issues during the conciliation process, and three failed completely. (In none of those three cases, however, was the dispute subsequently referred to arbitration or to the courts, to the ICC's knowledge.) Eight of the ten parties in the five successful cases were European (three Swiss, two French, one Spanish, one Italian and one from Monaco), one was from the United States and one was from Argentina. None of those parties was a governmental entity, although a public authority (from Asia) was a participant in the conciliation mentioned above that turned into an arbitration. State trading organisations from Central European countries were also parties in two of the three unsuccessful conciliations. (The other parties in those cases, however, were either Western European or American.)

In general, therefore, the users of the Conciliation Rules have been Western European private companies in connection with disputes arising under contracts with other Western European companies. The participants in the process, thus, constitute, a much less diverse group than the users of ICC arbitration.²³

Although conciliation is widely regarded as the preferred means of dispute settlement in Asia, in the only case in which ICC conciliation was requested by an Asian party against another Asian party (Indonesian versus Korean) since 1988, conciliation was declined.²⁴ There has also not been a single case in which an Arab party has agreed to conciliate, although parties from Qatar, Saudi Arabia and Yemen have been requested (in two cases by European parties (Swiss and Italian) and in a third by an Asian party (Korean)) to conciliate. American parties, also, have not yet shown much interest in participating in ICC conciliations, and, in one of the three unsuccessful conciliations mentioned above, it was the Swiss subsidiary of a large American company that declined to accept the conciliator's proposal.

As regards the size and nature of the disputes concerned, all of the successful conciliations involved relatively modest sums, ranging from less than U.S.$ 10,000 in one case to U.S.$ 2,6 million in the largest. The sums at stake in the unsuccessful cases were no larger, except in the one instance in which the conciliation led to an arbitration. There the claims asserted arose out of a large civil engineering project and were in the vicinity of U.S.$ 150 million. More typically, the disputes submitted to ICC conciliation have arisen in connection with contracts for the purchase of equipment or other goods, agency or license agreements. With the exception of the one case just mentioned, there have been no conciliations in the civil engineering or construction sectors, or other highly technical fields, although the ICC is administering a large number of arbitrations in those areas.

Against this general background, the following more specific observations may be made with respect to the operation of the ICC conciliation process itself.

A. Time and cost

There is little question that ICC conciliation is much more rapid and cheaper than the typical ICC arbitration (although arbitrations can be completed just as rapidly in some circumstances). ²⁵

With one exception - discussed further below - none of the ICC conciliations commenced since January 1988 cost the parties more than U.S.$ 14,000 for the fees and expenses of the conciliator and the ICC's administrative charge, and most cases were completed within a few months of receipt of the file by the conciliator.

A typical example is a recently completed conciliation involving a dispute between parties from Switzerland and Monaco. The dispute concerned a contract for the joint commercialisation of a product developed by one of the two companies concerned ("ABC") and the related use of its trademark. The other company ("XYZ") was obligated to pay FF 10,000,000 to ABC, purchase product from ABC and develop a large number of outlets for the sale of the product in question over a ten-year period. After one year XYZ came to the conclusion that the contract was not commercially viable for various reasons and sought either to renegotiate certain financial arrangements or terminate it. ABC, however, was unwilling to accept any of XYZ's proposals. The contract provided for the resolution of all disputes by ICC arbitration.

On March 11, 1992, counsel for XYZ submitted a Request for Conciliation to the ICC (although this was not provided for in the contract itself) . XYZ's counsel stated, in its Request, that

"Given the deterioration in the relations between the parties, which is manifested by the fact that they now only communicate by registered letter, it is clear that they cannot possibly successfully complete their initial project.

"In these circumstances ... [XYZ] wishes the conciliation of the International Chamber of Commerce of Paris in order to bring to an end the contract tying it to ... [ABC]."

By letter, dated March 27, 1992, ABC agreed to attempt to conciliate. A conciliator was then appointed by the Secretary General of the ICC Court and an advance on costs was fixed (in the amount of U.S.$ 13,000) by April 15, 1992. The advance was payable by the parties in equal shares, and, upon receipt of the full payment, the ICC submitted the file to the conciliator on May 13, 1992. The conciliator immediately contacted the parties in order to give them an opportunity to make written submissions and to fix a "hearing" date on July 9, 1992. At the July 9, 1992 hearing, which lasted six hours, a settlement agreement was reached providing for certain payments by XYZ to ABC and the termination of the contract. The dispute was thus resolved within two months of the conciliator 's receipt of the file. The total cost to the parties (exclusive of their own legal expenses) was U.S.$ 13,000 (U.S.$ 2,000 for the ICC's administrative charge and U.S.$ 11,000 for the conciliator 's fees and expenses), substantially less than they might have been expected to pay had the case gone to ICC arbitration.²⁶

The ICC's experience in other cases has been comparable. In some instances, however, the duration of the conciliation proceedings has been prolonged, either by delays in the payment of the advance on costs required before transmission of the file to the conciliator or due to delays in the submission of information to the conciliator by the parties. Most cases, however, have been concluded after a single exchange of documents and one meeting among the parties and the conciliator, with a settlement being reached at the meeting.

In contrast, the proceedings in the ICC's one civil engineering conciliation dragged out for more than a year with numerous voluminous exchanges of documents, the examination of witnesses, a site visit and several hearings, at a cost of U.S.$ 150,000 (for the conciliator's fees and expenses and the ICC's administrative charge), before being withdrawn and reintroduced as an ICC arbitration. Although the conciliation was eventually withdrawn, some issues were settled in the process and the arbitration commenced with the former conciliator acting as arbitrator, at the parties' request, and relying upon the submissions already made during the conciliation process. The time and money spent on conciliation in that case therefore cannot be said to have been lost.

Nor, moreover, were substantial sums expended or a great deal of time lost in connection with any of the conciliations that ended unsuccessfully during the period since January 1988. The most important such case involved claims for unpaid invoices of U.S.$ 3.2 million. The conciliator received the file on March 29, 1990. Two meetings were held with the parties in July and September 1990, at which time settlement proposals were advanced by the conciliator, but rejected by one of the parties. The final cost of the proceeding was U.S.$ 14,000.

B. Appointment of the conciliator

In no case have the parties themselves proposed or agreed upon a conciliator (although the parties attempted, unsuccessfully, to agree upon a conciliator in one case). Nor have the parties expressed a wish in any case for more than one conciliator. The use of a sole conciliator has unquestionably been an important factor in limiting both the time and cost of ICC conciliations.

Although the Conciliation Rules, unlike the ICC Rules of Arbitration, do not require that the conciliator be independent of the parties or that he or she be of a different nationality , the Secretary General of the ICC Court has, as a practical matter, in appointing conciliators, applied the same strict criteria that would be applied by the ICC Court in appointing arbitrators. Thus, prospective conciliators are requested, prior to appointment, to disclose in writing any facts or circumstances that might be of such a nature as to call into question the conciliator 's independence. In addition, in every conciliation but two the conciliator has been of a third nationality. (In each of the two exceptions the parties expressed a wish for a conciliator of the nationality of one of the parties.)

Identifying experienced conciliators to deal with the ICC's predominantly European conciliation case load has, until now, presented a challenge, given the little formal conciliation activity in Europe. The ICC Secretariat has therefore tended to draw its conciliators from among the ranks of those with experience in ICC arbitration. It is, however, recognised that there are a number of differences between the task of a conciliator and that of an arbitrator and that a skilled arbitrator will not necessarily make a good conciliator.²⁷

The challenge or replacement of a conciliator has not been an issue in any ICC conciliation to date. Given the very personal nature of the conciliator's function, the trust and confidence that the conciliator must enjoy, and the ease with which conciliations may be withdrawn and reintroduced, this is not an issue that is likely to arise very often, if at all. It is more likely that a proceeding would simply be terminated if one party were unhappy with the conciliator appointed.

C. Conduct of the conciliation

As noted above, the Conciliation Rules allow the conciliator considerable discretion in conducting a conciliation. As a conciliation is not an adjudicatory procedure, the conciliator is not bound by the Conciliation Rules to hear the parties together or to motivate any proposals that he or she may make on the basis of any particular laws, unless the parties otherwise requested.²⁸ Although the conciliator is expected to be guided by the "principles of impartiality, equity and justice" (Conciliation Rules, Article 5), it would undoubtedly be very difficult to establish in any particular case that a conciliator was not so guided. Of course, a party who considers that a conciliator's position is unfair or misguided always has the option of terminating the conciliation or rejecting the conciliator 's proposals.

It has been written, with respect to mediation, that the mediator "must play a far more active and intrusive role" than the arbitrator.²⁹ The mediator must try to develop an appreciation of each of the parties' underlying interests and positions, and this may be possible, in some circumstances, only through separate, confidential meetings with each of them. Indeed, such "caucusing" has been described as key to the success of certain mediations.³⁰ Itis, in any event, evident that a conciliation (or mediation) is not an adversarial process and that the ordinary constraints of procedural due process need not apply, as in an arbitration proceeding.

In practice, however, ICC conciliation proceedings have until now tended to take the form of mini-arbitrations, the main differences being that relatively short deadlines have been fixed for submissions, and the "hearing" has been conducted as a discussion culminating in a settlement proposal, as opposed to an award. The parties have, however, generally retained counsel to represent them. Written submissions - in some cases, quite voluminous - have been exchanged together with "evidence." Meetings - often referred to as "hearings" - have usually been organised in the presence of both parties , and occasionally witnesses have appeared to testify. In most cases, the parties appear to have adopted a generally passive role in respect of matters of procedure, leaving the initiative to the conciliator. In all cases but one, the conciliator has seen it as the conciliator 's responsibility to formulate a settlement proposal. (In one case, however, the conciliator made no proposal of his own and encouraged the parties instead to make proposals. That conciliation was unsuccessful.)

In some cases, the settlement proposals of the conciliator have been submitted to the parties in writing with an analysis of the relevant facts and law, much in the manner of an arbitration award. In fact, one such proposal so closely resembled an award that the parties were identified as "claimant" and "defend ant," terms that the Conciliation Rules carefully and appropriately avoid as the proceedings are not intended to be adversarial. (The conciliator's proposals in that one case, moreover, while well motivated, were not accepted by the "defendant," who, the conciliator suggested, should pay to the "claimant" essentially all that it was claiming.)

ICC conciliators have also been notably reluctant to meet (or "caucus") separately with the parties during the conciliation process. In the only case in which this was proposed, the conciliator, a non­lawyer from a common law jurisdiction, invited the parties

"... to consider whether it would be their wish that the ... [conciliator] can interview the Parties separately during the conciliation proceedings. If this is the wish of the Parties, then any factu al information given or allegations made by a party in such separate interviews may be disclosed to the other party for comment, but only with the consent of the disclosing party. If consent is withheld, then the ... [conciliator] would have to seek, by his own questions, ways to give the other party the opportunity to provide their point of view on the disclosed material."

In response, both parties indicated that they did not object to the conciliator interviewing the parties separately during the conciliation proceedings. However, they both insisted that any information given, or allegation made, by a party in such an interview should be disclosed to the other party for comments. In addition, it was proposed that the counsel of the party being interviewed should always be present.

Thus, even in that one instance, the participants in the conciliation were reluctant to jettison those elements of arbitral procedure that they regarded as fundamental to ensuring that they would have an opportunity both to present their case and to answer the case being made against them.

This adversarial mentality affected other aspects of the conciliation process and ultimately led to its abandonment and the commencement of arbitration proceedings. In particular, the parties were unable to agree on the extent of the "proof ' that they should be required to lay before the conciliator with respect to contested issues of fact. (The conciliation concerned substantial claims arising out of a civil engineering contract.)

The "defendant" party insisted that the "claimant" should be required to present an "actual and factual" basis for its claims. Its counsel sought nevertheless to distinguish the level of proof that should be required in a conciliation from that required in arbitration or litigation on the basis that the "defend ant" had entered into the conciliation process in a spirit of compromise, in the following terms:

"I have repeatedly pointed out ... that if I am to recommend a compromise of the Claimants' claims ... I must have a reasonable basis upon which to base my recommendation.

"... Defendants do not advocate an adversarial proceeding in requiring actual and factual analysis of the Claimants ' claims and ... the Defendants in so requiring do not wish to have a rigorous proof of each and every element of each claim and of the cost consequences of such elements .... [What is required] is an irreducible minimum amount of facts which have to be proven ... rather than each and every element to be rigorously proven and ... upon the establishment of such an irreducible minimum level of proof, the Defendants' counsel will then be in a position to recommend ... a compromise ... in the Conciliation process. "

What, however, may constitute "an irreducible minimum" amount of proof may be subject to considerable disagreement, and was, in the circumstances of this case. The conclusion drawn by the "claimant" was that if there was a need, in the conciliation, to establish "an actual and factual basis" for its claims, then this could really only be achieved in "fully argued adversarial proceedings." It took the position that a conciliation "should be a negotiation process towards an agreed settlement and should not be an arbitration in miniature." However, when substantial sums are at stake and complex issues of fact are disputed, only a very thin and unclear line may separate the reasonable expectations of parties in respect of evidence in a negotiation as opposed to an adversarial proceeding.³¹

Indeed, in the case in question, the conciliation procedure, in many respects, appears to have been virtually indistinguishable from the procedure that might have been followed in an arbitration. Thus, the conciliator 's initial proposal regarding procedure was as follows:

"A. The parties' attention is drawn to Articles 4 and 5 of the Rules.

"B. The Parties are hereby invited to consider the period of time they require for their part of the following submissions:

B.1. "A response from the Defendants to the Claimants' Request for conciliation. This response would be necessary to establish the measure of agreement between the Parties and the extent of the dispute to be resolved. A one month period is hereby suggested by the undersigned unless a shorter period is appropriate if this document has already been in the process of preparation.

B.2. "The Claimants ' Statement of Case and arguments in support of the case.

B.3. "Statement of Reply from the Defendants and arguments in support.

B.4. The Submission of any relevant documents and other evidence.

B.5. "Any other steps which are required by the Parties.

Once again a one-month period for each of these steps is suggested by the undersigned.

"C. The Parties are hereby invited to consider the most suitable poin t in ti me for a Preliminary Meeting with the undersigned and later for the conciliation proceedings to take place.

"If no agreement is reached on this point, then I propose that a Preliminary Meeting should be convened immediately after the submission of the document referred to in item B.1 above which will help resolve the whole matter of procedure to be followed including the timing of the conciliation proceedings following the submission of all the documents referred to in paragraph B above.

"D.

"E. It is to be noted that the undersigned, as the Conciliator, should have the power to do, amongst other things, an y or all of the following:

- require the submission of further evidence and/or information;

- require the submission of further statements and/or replies to questions by the Conciliator;

- carry out site visits;

- convene an informal hearing and examine the Parties and any witnesses orally;

- seek legal or expert technical advice;

and that either of the Parties may submit to the Conciliator their own proposals for settlement of the dispute.

Please confirm your approval of these powers."

In a case such as this, the principal benefits of the conciliation process, as opposed to arbitration, might be said to have resided principally in the parties' greater willingness to entrust the "resolution" of the dispute to one person, rather than a tribunal of three, to abide by stricter deadlines (out of fear that the time spent conciliating might be lost if the conciliation were unsuccessful) and a theoretical willingness to compromise.

The conciliator, for his part, saw it as his duty, while meeting with the parties, to act as a "devil's advocate," pointing out weaknesses and strengths in their respective positions. He also encouraged the parties, unlike in arbitration, to indicate "what each considered to be the minimum acceptable conditions for settlement " of their respective claims and counterclaims. However, this is something that the "defendants" were apparently unwilling to do without "factual and actual details" of all of the claims. The conciliator encouraged the parties to try to agree upon as many issues as possible at an early stage of the proceedings. But this too was fraught with evidentiary difficulties.

In the last analysis, all that one can really say about the difference between the evidentiary procedures that parties may wish to require in conciliation, as compared to arbitration, is that this is likely to depend on the magnitude of the dispute, the complexity of the issues and the parties' mastery of them, as well, of course, as on their willingness to compromise.

D. Success or failure of the conciliation process

In all of the ICC's successful conciliations but one there appears to have been a measure of satisfaction for both parties. (The only exception concerned a dispute over less than U.S.$ 10,000, where the parties merely sought a legal opinion from the conciliator.) The possibility of a compromise solution satisfactory to both parties may, thus, condition the likely success or failure of a conciliation.

Generally, an agreement of the parties to attempt conciliation seems to be a relatively good indicator of the parties ' willingness to compromise. Thus, a majority of the ICC cases (five out of nine) that have actually proceeded have ended successfully.

In one of the three cases that failed completely, the conciliator, as has already been mentioned, appears to have approached his task essentially in the manner of an arbitrator and submitted to the parties a written proposal for settlement that does not appear to have made any allowance for possible compromise. The "losing" party rejected the proposal. In the two other cases concerned, the "defendant" party was, in each case, a state trading organisation from a Central European (then communist) country. Those entities were, in fact, only intermediaries for the real parties in interest, who were not involved in the proceedings. It is therefore perhaps not entirely surprising that the conciliations did not succeed. Indeed, during the period under review, the ICC has not had a single successful conciliation involving a government party (although several ICC arbitrations involving government parties have ended with amicable settlements prior to an award being rendered).

Of course, the great majority of attempts to conciliate do not succeed simply because one party refuses to agree to attempt conciliation. No particular patterns or trends can be said to have emerged from the ICC's experience to date. In this regard, few parties have felt the need to give reasons for their unwillingness to attempt conciliation. A few typical explanations received at the ICC in recent cases are as follows:

"If it is possible to resolve this impasse at all through negotiation, we believe that we can do so directly . . . without the intercession of a conciliator. On the other hand, if the impasse cannot be resolved through negotiation ... then conciliation cannot possibly be of assistance."

"[This company] ... respectfully declines to participate in Optional Conciliation ... since [it] ... has sought legal remedies in Italy for [the other company's] ... alleged breach of the cited agreement."

"... the Contractor is not entitled to refer the matter of the dispute to the ICC International Court of Arbitration, and such procedure is not in compliance with the provisions of contract" [which do not provide for ICC conciliation].

In addition, in several cases, parties have declined to participate in conciliation proceedings because they stated that they did not wish to pay for them.

Of those ICC conciliations that failed, only one has subsequently been submitted to ICC arbitration. Moreover, only a relatively small number of the cases in which conciliation was declined have subsequently been submitted to ICC arbitration.³² It is therefore possible that many of those cases later settled amicably without the ICC's knowledge. The ICC is not aware of any judicial or arbitral proceedings subsequently commenced in respect of any of its successful conciliation proceedings.

E. Subsequent use of knowledge gained in the conciliation process

It is sometimes said that parties may be reluctant to attempt conciliation out of fear of revealing information that may subsequently prejudice them if the conciliation is unsuccessful. As already discussed, the Conciliation Rules contain confidentiality provisions that are intended to limit this risk. As a practical matter, however, the ICC is not aware of any judicial or arbitration proceedings in which those confidentiality provisions have had to be construed or otherwise tested. In the one conciliation where the most voluminous submissions and evidence were presented (the civil engineering case referred to above), the parties not only did not subsequently invoke the confidentiality provisions, but instead requested the conciliator to sit as arbitrator in the arbitration initiated after the withdrawal of the conciliation.

Although it is not really possible to know, from our vantage point at the ICC, whether parties participating in the conciliation process have felt any inhibitions in communicating relevant information to the conciliator, we have not seen any evidence of this in the few conciliations conducted since 1988 under the ICC's auspices. On the contrary, parties consenting to participate in the process appear to have done so in the good faith wish of resolving their dispu te and, accordingly, appear to have been prepared to disclose relevant documentation.

III - CONCLUSIONS

Although little use has been made of the Conciliation Rules in recent years, it follows from the very fact of their successful application, albeit in a small number of cases, that there is a role for conciliation in the resolution of international commercial disputes. Although conciliation is obviously not going to be either possible or appropriate in all circumstances, I suspect that it could be usefully attempted much more often than is the case at present.

In relatively small cases, in particular, parties need to weigh very carefully the relative advantages and disadvantages of conciliation as opposed to arbitration. Still today, the ICC receives many arbitration requests regarding relatively small sums of money. In 1993, 76 ICC arbitrations were commenced in respect of claims under U.S.$ 500,000, and, of those, 43 were for sums less than U.S.$ 200,000. Provided, of course, that the parties are in good faith and that both really wish to resolve their dispute, conciliation is an option that has to be seriously considered in respect of such cases, for reasons of cost alone.³³

While there will always be a risk in such cases that the attempted conciliation will fail and that time and money will be lost as a result, it appears from the ICC's experience to date that the potential loss, in time and money, is not really likely to be so great, particularly in a small case, when measured against the potential savings if the conciliation succeeds. It is, moreover, encouraging to note that more than 50% of the ICC conciliations that have actually proceeded have resulted in settlement agreements.

While parties may also be reluctant to agree to conciliation out of fear that they will be required to compromise - and therefore fare less well than might be the case in an adjudicated proceeding - this need not necessarily be so. It is true, as discussed above, that in the ICC's successful conciliations, there has generally been a measure of success for both parties and neither may have obtained all that it may have claimed. However, this does not mean that a conciliator will disregard a party's legal or contractual entitlements in attempting to fashion a satisfactory settlement. Moreover, there is no reason why, if that is the parties' wish, a conciliator, as a neutral third person, cannot provide them with a non-binding opinion on the strengths or weaknesses of their respective legal positions. Indeed, this is precisely what a conciliator might reasonably be expected to do during the conciliation process. Through conciliation, therefore, the parties may be able to obtain an objective view of the dispute between them from a professional of the same quality and experience as the person who might otherwise be likely to sit as an arbitrator, but more quickly and at less cost because of the proceeding's much simpler character.

Where, however, a great deal is at stake for the parties, where the issues are complex, or where there is not at least a minimal level of trust, conciliation will pose much greater difficulties and may well come to resemble an adversarial proceeding, without the benefit of a binding decision at the end of the process. Moreover, the parties are more likely, in such cases, to have divergent views concerning the manner in which they wish to have the conciliation proceeding conducted or, more broadly speaking, what it is exactly that they wish the conciliator to do.

While going through the ICC's conciliation files, I have developed the sense that one of the reasons why there is not more international conciliation today is simply that parties have little idea what it may entail and do not appreciate its extraordinary flexibility. Conciliators, in tum, need to learn more about the methodology of conducting conciliation proceedings, as distinct from arbitrations or other adversarial proceedings.

When the ICC developed its first conciliation rules for international disputes more than seventy years ago, it did so on the basis of the previous experience of the United States Chamber of Commerce and the Bolsa de Comercio of Buenos Aires in organising jointly a system for the conciliation and arbitration of disputes between merchants from those two countries. Owen Young, chairman of the arbitration committee of the United States Chamber of Commerce at the time, advised the ICC that the experience of the administration of the United States-Argentine arbitration arrangement showed that

"... in perhaps nine cases out of ten, an impartial preliminary examination of the documents submitted by the two parties will demonstrate the existence of such a misunderstanding and that the two parties may be brought to an agreement without involving either the expense or the delay of a formal arbitration."³⁴

Although the world has changed a great deal since that time, there is probably still much truth to Mr. Young's observation.

This has, on occasion, given rise to the argument of defendant parties in arbitrations commenced on the basis of the standard clause that no such arbitration can validly be commenced without a preliminary attempt at conciliation. However, as the Conciliation Rules are themselves stated to be "optional," and an agreement of the parties to attempt to conciliate a dispute, following the introduction of a conciliation request, is necessary to set a conciliation in motion, the reference in the standard clause to the Conciliation Rules should not normally constitute an obstacle to the commencement of arbitration proceedings in the absence of a conciliation attempt. A Working Group established by the ICC Commission on International Arbitration has nevertheless recommended that the reference in the standard clause to the Conciliation Rules be deleted in order to prevent any argument, "no matter how farfetched," being made that might impede the arbitration process . The Working Group was not aware, however, of any practical difficulty or legal impediment occasioned in ICC arbitration practice by the reference in the standard clause to the Conciliation Rules (Final Report, dated October 21, 1991, of the Working Group on the ICC Standard Arbitration Clause, unpublished).

$ 9,770.

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